 Why do Indian Firms Borrow in Foreign Currency?Ashis Pradhan and Gourishankar Hiremath Margin: The Journal of Applied Economic Research, 2020, vol. 14, issue 2, 191-211 Abstract: We investigate why firms in emerging economies such as India borrow in foreign currency. The results of a dynamic panel regression approach suggest that both firm-specific factors and macroeconomic factors are significant in explaining the corporate sector dollarization. Export revenue and tangible assets are primary drivers of the external commercial borrowings (ECBs) of non-financial firms, whereas the ECBs of financial firms are sensitive to interest rates in global markets. The policy measures to relax restrictions on firm borrowing in foreign currency facilitate the denomination of corporate debt in foreign currency, but such exposure was adversely affected by the global financial crisis. The findings of the study suggest the vital need to develop the domestic bond market to reduce firms’ dependency on external finance. The results also call for competitive interest rates in the domestic fixed income segment through monetary policy intervention. JEL Classification: G300, G320, F310 Keywords: Foreign Currency Borrowings; Dollar Debt; Non-financial Firms; Interest Rate; Exchange Rate Depreciation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:14:y:2020:i:2:p:191-211 Access Statistics for this article More articles in Margin: The Journal of Applied Economic Research from National Council of Applied Economic Research |
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